Bonds Over Gold (TLT/GLD Ratio) - Deflation Fears Rule

When the market fears DEFLATION, Bonds go UP and Gold goes down, driving this ratio higher.

We have just finished a major "deflation fear" wave that has failed to make a push during this entire stock market decline in the past 5 days. Since this ratio has stalled out during this stock market slide (5%), I am going to view Bonds as a low risk short sale with specific parameters, to be discussed.

This looks like a normal "wave" of "deflation fears" with bonds dramatically outperforming gold and just a slight underperformance by bonds ( TLT ) versus gold ( GLD ) and this ratio will turn down and give a low risk short sale. If the stock market "crashes", then you do NOT want to be short the bonds, as they could rally 5-10 points in a matter of days. Keep your risk in control and low. Use options to manage risk if you fear outright losses from short positions.

Tim 1:23AM EST 10/14/2014

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The big 5+ point jump in bonds was the mini-correction (not really a crash), but shows how dangerous the bond market can be for traders. From a long term perspective, this is a great time to take money off the table in bonds and move it over into gold. That's how you have to think to be successful - a bit different from the crowd.